Income Tax (Tables)

12 Months Ended

Dec. 31, 2018

Provision for income tax from continuing operations

The provision for income tax from continuing operations was as follows:



	Years Ended December 31,
	2018			2017			2016
	(In millions)
Current:
U.S. federal	$	(207	)	$	(246	)	$	520
U.S. state and local	11			5			3
Non-U.S.	932			891			628
Subtotal	736			650			1,151
Deferred:
U.S. federal	342			(2,373		)	(827		)
Non-U.S.	101			253			369
Subtotal	443			(2,120		)	(458		)
Provision for income tax expense (benefit)	$	1,179		$	(1,470	)	$	693

Income (loss) from continuing operations before income tax expense (benefit) from domestic and foreign operations

The Company’s income (loss) from continuing operations before income tax expense (benefit) was as follows:



	Years Ended December 31,
	2018			2017		2016
	(In millions)
Income (loss) from continuing operations:
U.S.	$	(803	)	$	684	$	185
Non-U.S.	7,110			2,852		4,096
Total	$	6,307		$	3,536	$	4,281

Income tax for continuing operations effective rate reconciliation

The reconciliation of the income tax provision at the U.S. statutory rate (21% in 2018; 35% in 2017 and 2016) to the provision for income tax as reported for continuing operations was as follows:



	Years Ended December 31,
	2018			2017			2016
	(In millions)
Tax provision at U.S. statutory rate	$	1,325		$	1,238		$	1,498
Tax effect of:
Dividend received deduction	(35		)	(67		)	(69		)
Tax-exempt income	(29		)	(97		)	(86		)
Prior year tax (1)	(197		)	(27		)	(13		)
Low income housing tax credits	(284		)	(278		)	(270		)
Other tax credits	(79		)	(102		)	(98		)
Foreign tax rate differential (2), (3), (4)	335			(95		)	(332		)
Change in valuation allowance	(2		)	(8		)	(9		)
Separation tax benefits	—			(540		)	—
U.S. Tax Reform impact (5), (6)	78			(1,519		)	—
Other, net (7)	67			25			72
Provision for income tax expense (benefit)	$	1,179		$	(1,470	)	$	693

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(1)	As discussed further below, for the year ended December 31, 2018, prior year tax includes a $168 million non-cash benefit related to an uncertain tax position.


(2)	For the year ended December 31, 2018, foreign tax rate differential includes tax charges of $45 million related to Global Intangible Low-Taxed Income (“GILTI”), $17 million related to a tax adjustment in Chile and $13 million from changes in the valuation of the peso in Argentina.

(3)

For the year ended December 31, 2017, foreign tax rate differential includes a net tax charge of $180 million as a result of repatriation. Included in the net tax charge of $180 million is a $444 million tax charge related to the repatriation of approximately $3.0 billion of pre-2017 earnings following the post-Separation review of the Company’s capital needs. This charge was partially offset by a $264 million tax benefit associated with dividends from other non-U.S. operations. This charge was recorded prior to U.S. Tax Reform and is incremental to the $170 million repatriation transition tax recorded for the year ended December 31, 2017.


(4)	For the year ended December 31, 2016, foreign tax rate differential includes a tax benefit of $110 million in Japan related to a change in tax rate, offset by a tax charge of $19 million in Chile related to a change in tax rate.


(5)	For the year ended December 31, 2018, U.S. Tax Reform impact includes a $468 million tax charge related to the deemed repatriation transition tax, offset by a $390 million tax benefit related to the adjustment of deferred taxes due to the U.S. tax rate change. This excludes $12 million of tax provision at the U.S. statutory rate for a total tax reform charge of $66 million.


(6)	For the year ended December 31, 2017, U.S. Tax Reform impact of ($1.5) billion excludes ($101) million of tax provision at the U.S. statutory rate for a total tax reform benefit of ($1.6) billion.

(7)

For the year ended December 31, 2018, other includes tax charges of $69 million related to the non-deductible loss incurred on the mark-to-market and exchange of FVO Brighthouse Common Stock and $18 million related to a non-deductible Patient Protection and Affordable Care Act excise tax, offset by a tax benefit of $36 million related to a non-cash transfer of assets from a wholly-owned U.K. subsidiary to its U.S. parent.

Impact of U.S. Tax Reform [Table Text Block]

The incremental financial statement impact related to U.S. Tax Reform was as follows:



	Years Ended December 31,
	2018			2017
	(In millions)
Income (loss) from continuing operations before provision for income tax	$	(58	)	$	(289	)
Provision for income tax expense (benefit):
Deemed repatriation	468			170
Deferred tax revaluation	(402		)	(1,790		)
Total provision for income tax expense (benefit)	66			(1,620		)
Income (loss) from continuing operations, net of income tax	(124		)	1,331
Income tax (expense) benefit related to items of other comprehensive income (loss)	—			144
Increase to net equity from U.S. Tax Reform	$	(124	)	$	1,475

Components of deferred tax assets and liabilities

Deferred income tax represents the tax effect of the differences between the book and tax bases of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following at:



	December 31,
	2018			2017
	(In millions)
Deferred income tax assets:
Policyholder liabilities and receivables	$	2,887		$	2,654
Net operating loss carryforwards	104			512
Employee benefits	705			802
Capital loss carryforwards	—			6
Tax credit carryforwards	1,113			1,322
Litigation-related and government mandated	161			160
Other	191			657
Total gross deferred income tax assets	5,161			6,113
Less: Valuation allowance	169			189
Total net deferred income tax assets	4,992			5,924
Deferred income tax liabilities:
Investments, including derivatives	2,494			2,772
Intangibles	1,256			1,321
Net unrealized investment gains	2,898			4,783
DAC	3,263			3,206
Other	495			609
Total deferred income tax liabilities	10,406			12,691
Net deferred income tax asset (liability)	$	(5,414	)	$	(6,767	)

Summary of net operating loss carryforwards for tax purposes

The following table sets forth the net operating loss carryforwards for tax return purposes at December 31, 2018.



	Net Operating Loss Carryforwards
	U.S. Federal		U.S. State		Non-U.S.
	(In millions)
Expiration:
2019-2023	$	1	$	—	$	67
2024-2028	—		—		18
2029-2033	6		—		—
2034-2038	—		140		—
Indefinite	—		—		416
	$	7	$	140	$	501

Summary of Tax Credit Carryforwards

The following table sets forth the general business credits, foreign tax credits, and other credit carryforwards for tax return purposes at December 31, 2018.



	Tax Credit Carryforwards
	General Business Credits		Foreign Tax Credits		Other
	(In millions)
Expiration:
2019-2023	$	—	$	—	$	—
2024-2028	—		2		—
2029-2033	203		—		—
2034-2038	1,140		—		—
Indefinite	—		23		145
	$	1,343	$	25	$	145

Reconciliation of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:



	Years Ended December 31,
	2018			2017			2016
	(In millions)
Balance at January 1,	$	1,102		$	1,146		$	1,259
Additions for tax positions of prior years (1)	269			70			24
Reductions for tax positions of prior years (2)	(195		)	(101		)	(112		)
Additions for tax positions of current year (1)	226			33			23
Reductions for tax positions of current year	(3		)	(3		)	—
Settlements with tax authorities (3)	(288		)	(43		)	(48		)
Balance at December 31,	$	1,111		$	1,102		$	1,146
Unrecognized tax benefits that, if recognized, would impact the effective rate	$	1,046		$	1,073		$	1,112

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(1)	The increase in 2018 is primarily related to the deemed repatriation transition tax and the IRS issued proposed regulations.


(2)	The decrease in 2018 is primarily related to the non-cash benefit from the tax audit settlement discussed above.


(3)	The decrease in 2018 is primarily related to the tax audit settlement, of which $284 million was reclassified to the current income tax payable account.

Interest was as follows:



	Years Ended December 31,
	2018			2017		2016
	(In millions)
Interest expense (benefit) recognized on the consolidated statements of operations (1)	$	(441	)	$	37	$	(41	)

				December 31,
				2018		2017
				(In millions)
Interest included in other liabilities on the consolidated balance sheets				$	218	$	659

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(1)	The decrease in 2018 is primarily related to the tax audit settlement, of which $168 million was recorded in other expenses and $273 million was reclassified to the current income tax payable account.